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Having raised $450 million for its second fund, Dymon Asia Private Equity will continue targetingmiddle‐market companies in Southeast Asia that are looking for expertise as well as capital

For Chow Yin Tan, a partner at Dymon Asia Private Equity (DAPE), one of the biggest impediments to
investment in Southeast Asia is inertia. A company will be performing satisfactorily, propelled
forwards by general economic growth, and the founder‐entrepreneur opts for the status quo rather
than reaching for the opportunities he may know are there.

“They are indeed thinking about the next step in going beyond their current geography or addressing
shortcomings in their companies, but they may not have the resources to match the vision and they
get bogged down by day‐to‐day activities,” Tan explains. “A lot of our investments come out of us
getting a conversation going about what we can do for them beyond just providing capital.”

Of the 12 companies in DAPE’s first fund, which closed at S$300 million ($225 million) in 2014, seven
were in net cash positions and had banks willing to finance their expansion. The implication is that
DAPE found a way in because it offered something else.

In the case of healthcare facilities management company UEMS, Tan points to initiatives such as
taking out a minority shareholder that was not adding value, parting ways with a passive franchisor,
and introducing new technology that drove efficiencies. These acts were accomplished, he says,
because DAPE could disengage itself from the daily operations – management took care of that –
and focus on removing strategic impediments to growth.

The efforts also paid off. UEMS was sold in late 2016, giving the private equity firm a more than 5x
return on a two‐year investment. There is a sense that DAPE could have done even better had it held
on longer, but the GP knew that a quick win on its debut fund would be welcomed by LPs. There
have since been two more exits: Wah Loon Engineering was another strong performer, while
wallpaper distributor Goodrich Global didn’t do so well but the cost of the investment was
recovered.

LPs were suitably impressed – the IRR on Fund I is 30% – that DAPE recently closed its second fund at
$450 million, exceeding the target of $350 million. Temasek Holdings didn’t re‐up due to a strategy
shift, but most of the other existing backers did. Commitments from institutional investors and
professional family offices rose to 80% of the corpus. Meanwhile, the very Asian‐centric Fund I LP
base was tweaked to include greater representation from Europe and the US.

The increase in fund size reflects changes that began to be implemented several years ago. DAPE
was launched as a Singapore‐focused GP with two deal partners. There are now four deal leaders –
of whom three are partners – and offices in Malaysia and Thailand.

However, Fund II won’t differ greatly from its predecessor on strategy and sector, with consumer
products and services, business services, and niche manufacturing expected to feature strongly.
“There’s still a middle‐market gap and it’s crying out for expertise,” Tan adds.